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CapitaLand makes $990m offer to take Ascott private

Company sees value in subsidiary that has not been recognised by market, analysts say

(SINGAPORE) Property giant CapitaLand yesterday made a general offer for its listed subsidiary Ascott Group in a deal that values the serviced residence unit at $2.8 billion.

CapitaLand, South-east Asia’s largest property firm by market value, owns 66.5 per cent of Ascott.

Under the unconditional general offer, CapitaLand aims to buy all Ascott shares it does not own at $1.73 a share.

CapitaLand said that it could invest up to $989.5 million to acquire the remaining 33.5 per cent of Ascott as well as any outstanding options and awards that could be exercised.

Ascott, which last traded at $1.21 a share on Jan 4, has a market capitalisation of $1.94 billion. CapitaLand’s offer price is 43 per cent higher than the last traded price and represents a premium of 41.8 per cent to the one-month volume-weighted average price of Ascott shares.

The offer price is also a premium of about 145 per cent to Ascott’s unaudited net asset value per share as at Sept 30, 2007.

Analysts said that CapitaLand wants to take Ascott private because the latter’s value has not been fully reflected in its share price performance. The offer is also timely as Ascott’s shares are nowhere close to their peak.

The shares have fallen from their one-year high of $2.06 in May last year. And over the past one year, the company’s stock has fallen 17.7 per cent.

‘CapitaLand sees a lot of value in Ascott, but that has not been recognised by the market,’ said a property analyst.

Interest in the stock has typically been low, the analyst said, as many investors who want a stake in Ascott just buy shares of CapitaLand instead. ‘Ascott has never been that well followed,’ echoed David Lum, an analyst at the Daiwa Institute of Research. ‘It is followed, but not as followed as CapitaLand. It is not a liquid stock.’

Shares of both CapitaLand and Ascott as well as Ascott’s listed trust Ascott Residence Trust (ART) were suspended yesterday pending an announcement.

But in a move that surprised many, CapitaLand first put out a statement saying that it might make a general offer.

The actual details of the offer – including the offer price – were released much later last night.

The former announcement led to market speculation that news of the intended offer could have leaked, forcing CapitaLand to first declare that an offer was in the making.

CapitaLand’s Ascott stake is thought to be key as it gives the company a global footprint. Its offer was ‘not unexpected’, analysts said.

Ascott is the biggest operator of serviced apartments in Asia and Europe. The company has close to 14,800 units in the key cities of Asia, Europe and the Gulf region as well as 5,400 units under development – making a total of over 20,200 units.

The company aims to boost revenue by expanding the number of units to 25,000 by 2010. And for its next phase of growth, it will look to emerging markets, its chief executive, Jennie Chua, has said.

If Ascott is delisted, it will be able to move faster on projects together with CapitaLand, the developer said.

CapitaLand will also be able to fully integrate Ascott’s business and operations into the whole group, which will allow it to deploy capital and human resources seamlessly within the group.

Analysts compared CapitaLand’s offer for Ascott to OCBC Bank’s bid for its listed unit, Great Eastern Holdings.

OCBC has made offers to buy out Great Eastern in the past and has steadily accumulated shares in its subsidiary over time. However, the bank has not made offers at very high premiums to those shareholders who have yet to sell. CapitaLand is similarly unlikely to offer high premiums to buy out Ascott shareholders who hold out, analysts said.

CapitaLand’s shares closed at $6.25 on Jan 4, the last day of trading before the counter was suspended. The acquisition will be funded by bank borrowings, CapitaLand said. The company, which is one of the biggest listed on the Singapore Exchange, has a market capitalisation of $17.5 billion.


Source: Business Times 8 Jan 08


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